Adrian oil trust deposits continue

Thursday

Nov 21, 2013 at 5:00 PM

By David FrownfelderDaily Telegram Staff Writer

The action taken by the Adrian City Commission Monday did not overturn the trust fund created for oil and gas royalties.

The motion, approved on a 5-2 vote, directed city attorney Sarah Osburn to look into options the city may have in regard to the trust fund. She is to report her findings at the next commission meeting.

City administrator Dane Nelson said Wednesday nothing has changed as a result of the commission’s action Monday. Any money the city receives will go directly into the trust.

“All they did was pass a motion that the city attorney should look at other options regarding the trust fund,” Nelson said.

Checks have been received about every month, he said. Since May, Adrian has received three checks totaling about $270,000 from royalties earned from the leases on two oil wells.

Nelson said the size of the checks depends on several factors including the price received for the sold oil and from which oil well comes online. A typical Michigan oil well lasts between eight and 15 years, and the city would receive royalties on a monthly basis until the wells no longer produce. Once the wells are both fully online, Nelson said, the city could receive between $100,000 and $125,000 every month.

The trust fund, established through First Federal Bank, is for 15 years and funds would accumulate in that period. After 30 months, the city could take up to 5 percent of the principal for either capital projects or for a one-time expenditure while the trust continues to accumulate, Nelson said.

Mayor Jim Berryman ran his election campaign on doing away with the trust fund and using the money in the budget. In his first meeting as mayor Monday, Berryman’s proposal to have the attorney look for other options, was approved on a 5-2 vote. Commissioners Jerry Gallatin and John Dudas voted against the motion.

“The original motion was to stop depositing the funds, but that was amended,” Berryman said Wednesday.

Berryman said the city needs flexibility in using the funds. At the meeting Monday, he said the city budget is extremely tight and if the oil money can be used to provide city services, that is how it should be used.

“Save some, yes, but if we can use it today, let’s use it,” he said Wednesday.